Out of the Shadows

Back in January 2009, “Building Blocks” discussed the importance of operational vigilance and the need to be constantly alert for those unexpected, happen-in-a-nanosecond changes that can significantly affect business performance. Today, operational vigilance remains a necessary attribute for world-class performance.

The unexpected can come from a variety of sources and often has surprising results. For example, the euro zone crisis beginning in late 2009 caused many markets to shrink dramatically and had a significant negative impact on suppliers that essentially became unreliable. Likewise, the Gulf of Mexico oil spill in the summer of 2010 dramatically damaged the coast’s fishing industry, but created an unexpected positive outcome for industries providing oil-skimming equipment and oil-capturing materials.

Supply chain and operations managers always have had to deal with unexpected events as they aim to provide customers with quality products quickly. Finding ways to operate at increasingly heightened levels—despite uncontrollable circumstances—continues to be the focus. However, as we operate more and more in globally extended networks, the complexity of the challenge has increased significantly compared to the days when we primarily served local markets.

Do you remember those fateful days in 2008 when many of us thought a global depression was right around the corner? Surely those conditions influenced many operational decisions. A number of companies that heeded the warning signals realized decent rebounds in 2009 and 2010. In the automotive industry, Ford went from operating at a deficit to a 732 percent improvement in earnings per share in the same time frame. Apple enjoyed a 37 percent increase in rolling earnings per share. And for several years now, Apple has been recognized for not only its exciting product launches, but also near-flawless execution of its extended global supply chain, despite turbulence caused by external factors.

While it could be argued that such companies essentially benefitted from new-product development and smart product launches, it also is true that operational vigilance was a significant contributor to their successes. These world-class organizations were prudent enough to expect the unexpected.

Still, even Apple and Ford must remain vigilant. For example, Apple recently had supplier issues in 2012 that included labor disputes, demand forecast issues, and even some quality problems with the launch of the iPhone 5. Ford’s unexpected challenges included a fire risk on the Escape, along with supplier issues in Australia that resulted in a 1,500-employee plant being shut down temporarily.